Nestle - DOC by mrsumairsheikh

Nestle is now the world’s largest food company. It is present on five continents, has an annual turnover 70 billion Swiss francs, runs 522 factories in 81 countries, 200operating companies, 1 basic research center and 20 technological development group and more than 231,000 employees the world over.

Introduction 1
Introduction
THE NESTLE STORY
Nestle S.A. the present Switzerland based international food group, originally
consisted of two companies and two products: Henri Nestle and his baby food in
Vevey, and the Anglo-Swiss Condensed Milk company and its condensed Milk
Company and its condensed milk in Cham, both in Switzerland. In 1866 the Page
Brothers form the United States set up a new industry in Cham, making
condensed milk from a raw material that was available in abundance in the
region. In 1867 Henri Nestle a chemist in Vevey, created a milk and cereal based
food for babies. The companies competed vigorously until 1905, when they
merged and became the starting point of the present food group.
DYNAMIC EXPANSION
The history of Nestle include the development of many different products as well
as acquisitions, mergers and the purchasing of shares in companies, mainly
abroad, over the course of the tears, this enabled it to broaden its range of
products and diversify its operations, while at the same time strengthening the
economic foundations of the company. Amongst the most important acquisitions
were Carnation in Los Angeles (milk products and pet foods) and more recently
Rowntree Mackintosh in York (chocolate and confectionery), Buitoni in Perugia
(pasa) as well as Perrier in France (mineral water).
Nestle which does 98% of its business outside Switzerland, also has interests in
non-food sectors, in cosmetics (a large share holding in L’Oreal) and ophthalmic
products (acquisition of Alcon laboratories Inc.) while continuing to give priority
to food products.
NESTLE TODAY
Nestle is now the world’s largest food company. It is present on five continents,
has an annual turnover 70 billion Swiss francs, runs 522 factories in 81 countries,
200operating companies, 1 basic research center and 20 technological
development group and more than 231,000 employees the world over.
The company owes its current status to the pioneering spirit inherited from its
founders which continues to inspire it, to its constant search for new ways of
satisfying man’s mutational needs.
Nestle Milkpak Ltd. 2
Wherever possible, it sets up factories locally, employees personnel from the
country concerned and relies on indigenous raw materials. Its agricultural
services provide assistance to improve the quality and yield of the raw materials
it uses. Much attention is devoted to professional training and to the integration
of the company in its economics and social environment.
Nestle Milkpak Ltd.
As a consequence of joint venture arrangement between Nestle S.A. of
Switzerland and Milkpak Ltd. In 1988, the existing production facility of Milkpak
in Sheikhupura became a part of Nestle Milkpak.
The Milkpak Sheikhupura factory had commenced operations in 1981 as a
producer of UHT milk. By 1988, it had expanded its operation and was also
producing butter, cream, Desi ghee – all under the brand name of MILKPAK and
juice drinks under the brand name FROST.
Conscious of the large food market that Pakistan offered, Nestle Milkpak drew up
ambitious expansion plans. While re-organizing and re-enforcing the production
of existing brands, it lost no time in giving shape to new production lines. The first
to come was a milk powder plant, which not only began producing NIDO in 1990
but was also critical to the production of several milk-based products in the
future. With the installation of the roller dryer in 1990, the first such product to
come was CERELAC – an internationally recognized brand on infant cereal,
followed by LACTOGEN 1 & 2 in 1991.
The year 1992 saw the introduction of tea whitener EVERYDAY and milk powder
in bulk packing named GLORIA. MILO and NESLAC came under production in
1994 and MILO RTD, In 1995. Local packing of coffee mixes under the name of
NESCAFE 3 in 1 commenced the same year. In 1996, Nestle Milkpak Ltd. first
confectionery plant of POLO Mint was installed and the line of NESTL’E PURE
ORANGE JUICE was also added. Packaging of coffee under the brand name
NESCAFE CLASSIC was undertaken the same year. In 1997 NESTL’E WHEAT and
two variants of POLO viz. strawberry and Orange were introduced.
1998 has been, by far, the most outstanding year for Nestle Milkpak. As a result
of the timely implementation of major expansion plans, involving a substantial
capital outlay, no less than 17 products were launched during the year.
Significantly, the factory now houses three new flavors of POLO in addition to
two flavors of POLO, namely Blackcurrent and Strong Mint brought the number
of POLO variants to five. A new variant Lemony was added to the range of
Nestle Milkpak Ltd. 3
popular FROST fruit drink flavors and a new 1-liter packing of FROST was
introduced. Three flavored milk – Vanilla, Strawberry and Mango, under the
brand FRESH & FRUITY, came under production on the new Tetra Filling Machine
equipped with the modern “slim” format. MILO RTD and UHT Cream were also
shifted over to this new format. A flexible confectionery line for the manufacture
of a wide range of high and low boiled sweets and toffees was commissioned,
with TOFFO and two variants of SOOTHERS – Menthol Eucalyptus and Honey
Lemon, being the maiden products. Nestle Milkpak also contracted to supply
dairy mixes to McDonald’s, for its popular soft serves and milk shakes. And to top
it all, the most prestigious project, NESTLE PURE LIFE was also commissioned in
December 1998. based on the latest water treatment and bottling technology,
this marked the entry of Nestle Milkpak in the Pakistan water market.
In the past, Indus Fruit Products Ltd. has been co-processing fruit pulping for
Nestle Milkpak. In view of the growing needs of fruit pulp for its products as well
as for exports, Nestle Milkpak entered into a 5-year lease agreement with the
management enables Nestle Milkpak to put in place its own systems to ensure
better product quality and capacity utilization. The new cold sauces production
line has been established at this plant.
Nestle Milkpak Ltd. 4
ESTABLISHMENT OF NESTLE MILKPAK, KABIRWALA FACTORY
In 1986 Milkpak Ltd. acquired the services of Kabirwala Dairy Ltd. For co packing
of UHT milk under the brand name MILKPAK. Nestle Milkpak acquired KDL in
1990 as a subsidiary and began installation on a MAGGI NOODLES plant in 1991.
this production line became operational in 1992 with two flavors: Chicken and
Masala. This second milk powder plant was commissioned in September 1996.
the plant produces NIDO, GLORIA and skim milk powder. The UHT line was
discontinued in June 1996 and the same year witnessed the launching of the
MAGGI YAKHNI line with 3 flavors: Chicken, Masala and Chatpata.
With the merger of this factory with Nestle Milkpak in April 1997, Kabirwala
Factory, as it is now called, is a fully owned unit of Nestle Milkpak Ltd.
In February 1999 the newly installed evaporator came on stream in Kabirwala
Factory, doubling the output of the spray dryer. Alongside, the warehouse
capacity at Kabirwala to handle the increased volumes of finished products was
proportionately increased. 1999 also saw the installation of a pouch-filling
machine, making Kabirwala Factory independent from Sheikhupura for the filling
of full cream milk powder.
CORPORATE STRUCTURE 5
CORPORATE STRUCTURE
Head Office
The registered and corporate office of Nestle Milkpak Ltd. is in Lahore.
308 – Upper Mall Lahore
PABX: 5757082-95
Fax: 5711820
Factories
There are two factories of Nestle Milkpak Ltd. For dairy products.
Sheikhupura:
29th km, Lahore - Sheikhupura Road,
Sheikhupura, Punjab, Pakistan.
Kabirwala:
Khanewal – Kabirwala Road, Kabirwala
District Khanewal, Punjab, Pakistan.
There are two plants for Mineral Water situated in:
Islamabad :
Karachi:
REGIONAL OFFICES
Company has ten regional sales offices in following cities of Pakistan:
 Karachi
 Hyderabad
 Sukkhar
CORPORATE STRUCTURE 6
 Lahore
 Multan
 Faisalabad
 Gujanwala
 Quetta
 Islamabad
 Peshawar
MILK COLLECTION CENTERS
The core raw material of Nestle Milkpak is milk. Over the last thirteen years the
company prime concern has been to improve the quality and volume of milk for
UHT processing and for other milk base products. So the company has twenty-
five milk collection centers in Pakistan.
DIVISIONS OF NESTLE MILKPAK LTD. 7
DIVISIONS OF NESTLE MILKPAK LTD.
Production Division Marketing Division Milk Collection Division
Quality Assurance. Depet Customer Relation Department Agricultural Services
Brand Wise Production Distribution Department Department
Departments Research & Development Logistic Department
Packaging Department Department
HR Division Finance Division
Personnel Department Treasury Department
Accounts Department
Products 8
Products
Year Product Name
1981 UHT Milk
1983 Butter
1986 Milk Pak Cream
Desi Ghee
Frost Juice
Milk Pak UHT Milk
1990 Nido
Cerelac
1991 Nestum
Lectogen
1992 Everyday Tea Whitener
Gloria
Maggis Noodles
1994 Milo
Neslac
1995 Millo RTD
Nescafe 3 in 1
Products 9
1996 Every day UHT Milk
Nestle Orange Juice
Nestea
Polo
Nescafe Classic
Maggi Yakhni
1997 Nestle Wheat
1998 Toffo
Soothers
Nestle Pure Life
1999 Maggi Sauces
Fruit Drops
Butter Skotch
2001 Nescafe Creamy Flavors
Role of Nestle Milkpak Ltd. in Industry 10
Role of Nestle Milkpak Ltd. in Industry
Nestle Milkpak Ltd. is the market leader in food and beverage industry. They are
producing high quality well known brands. There no is such competitor that can
compete Nestle Milkpak Ltd. in its total product mix. There are a few local
competitors of the company in different product item. These competitors are:
Rafhan:
Rafhan is competing Nestle in infant and follow up cereals.
Shezan and Bambino:
Shezan and Bambino are competing Nestle Milkpak’s local brand “Frost”.
CDL and Adar-e-kisan:
These two competitors are competing in milk and milk powder products.
In spite of this competition, Nestle Milkpak Ltd. is enjoying about 70-75% market
share in Pakistan.
Selected Products
In order to satisfy the prime objective of this report, we have selected following
to product lines of Nestle Milkpak Ltd.
Selected Products 11
1. Condensed Milk
Mission
Statement
“Wherever you live, only Nestle can provide the best and most relevant food and
beverage products to meet your needs throughout your day, throughout your
life. The Nestle Network icon will take you on the journey of discovery through
our world of food.”
OBJECTIVES OF NESTLE MILKPAK LTD. 12
OBJECTIVES OF NESTLE MILKPAK LTD.
Nestle Milkpak believes in following objectives:
The major objective of the company is to sell high quality, innovative and
superior products which satisfy needs and wants of consumers.
Nestle not maximize profit through high market share but use maximize
customer’s satisfaction. Nestle earn profit through satisfaction of consumer.
The health of consumer and employees is at primary priorities. To ensure
consumer’s health, Nestle provide quality products and for employee health.
Nestle provide the pollution free environment and provide the medical facilities.
Nestle establish policies, programs and practices to conduct operation in an
environmentally sound manner.
Nestle operate to achieve highest standard of ethical conduct, which acquire
company’s activities and relationship world-wide in each business sector.
Nestle aim to deal only with reputable suppliers who willing to apply Nestle
Quality Standard.
Nestle has been committed to environmentally sound business practices
throughout the world.
13
CORPORATE STRATEGY
Corporate strategy defines the direction of the organization over the long term
and determines the goals that must be achieved for the firm to be successful.
EXTERNAL ENVIRONMENT
The top management of Nestle MilkPak continuously carries on environmental
scanning and within the environmental trends. Opportunities & opportunities
they carry on required adjustments in their organization to remain variable and
to survice in the face of competition.
CORE COMPETENCIES
Nestle Milk Pak has the following core competencies.
WORK FORCE
Nestle Milk Pak has a small work force as their most of the operations are
automated. They have a very skillful and trained workforce.
FACILITIES
The NM’s facilities i.e. offices stores and plants are very well located and have the
requisite capabilities, which is a big competitive advantage for them.
SYSTEM AND TECHNOLOGY
NM is an organization which heavily depends upon new systems and
technologies to excel in the market. The organization is well equipped with new
developed systems and technologies especially n their operations.
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COMPETITIVE PRIORITIES
Following are the competitive priorities of NM.
i. Consistent quality
ii. Development speed
iii. Volume flexibility
QUALITY
Quality is the cone competitive priority of NM. They take quality in two ways.
High performance design and consistent quality.
CONSISTENT QUALITY
NM pays special attention for maintaining consistent quality. They have special
sort of equipments and process which facilitates in maintaining a consistent
quality. So the each and every unit of its product equally satisfies its customers.
DEVELOPMENT SPEED
As for as develop speed is concerned NM is the industry leader not only in
Pakistan but all over the world. They have a team of very innovative people
which consistently focus on the development of new products and to improve
the already existing products.
VOLUME FLEXIBILITY
Volume flexibility is one of the competitive priority of NM. When the availability
of Milk is high in winter season they increase their production as the milk cannot
be stored for longer period of time. In season when there is shortage of milk their
production rates dropped. So they can adjust their volume of production
according to their requirements.
FLOW STRATEGY
15
Flow strategy is one of the primary element of operations strategy. Based on
competitive priorities a flow strategy is selected. It specifies has the operations
system to be organized and handled. For different set of products different flow
strategies can be implemented.
LINE FLOW STRATEGY
NM has adopted the line flow strategy here the system is organized around the
product. In this strategy all products follow linear pattern in facility. NM has high
volume production with highly automated facility and huge capital investment is
there and the standardized products they produce. So they follow the line
strategy.
STRATEGIES BASED ON FLOW
Following are the flow based strategies adopted by NM.
MAKE TO STOCK STRATEGY
NM follows the make to stock strategy. They have high volume production and
the demand for their products can be forecasted quite well, there exist repetition
of work and a consistent quality is maintained old these priorities lead to make to
stock strategy.
STANDARDIZED SERVICE STRATEGY
The products which are provided by NM are standardized. Therefore the
standardized service strategy also exist in NM Ltd. They have standardized and
consistent quality products.
16
PRODUCTION PROCESS
Milk Collection & Reception Storing Standardization De-Creaming
Cooling Spray Drying Evaporation Pasteurization
Packing
17
PRODUCTION PROCESS
MILK COLLECTION
Milk collection system of Nestle Milk Pak is excellent. According to this system
milk is collected from area of about 72,000 km .
Village Milk centers 2273
Sub centers 583
Main Centers 23
On milk centers price of milk is paid according to percentage of fats. If the quality
of fat is less than required (6%) than price will be paid accordingly. At milk
collection centers, gerber test is performed for determination of fat. In milk
collection centers temperature of milk is kept at 4 oC. Nestle purchase milk
directly few frames, there is no middle man.
Collection Areas are in all over Punjab Nestle Milk Pak divide the areas in
following Categories:
A. Sahiwal, Burewala, Okara etc.
B. Pindi Bhattian, Chaniot, Sarghoda
C. Kabir Wala, Mian Channu, Shorkot, Kahane wal, Kachah Khu
D. Bahawalpur , Bahawalnagar, Chistian, Ahmadpur
There are Area collection managers, Milk collection Co coordinators and Milk
Collection Supervisors in each Area for collection of specific amount of Milk in
specific time.
RECEPTION
From milk collection centers milk is collected and delivered to factory daily seal of
tankers are properly decided. Receiving capacity of milk is 60,000 liters. At
reception following tests are performed before storing milk to assure the quality
of milk.
1- Alcohol precipitation test
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2- Clot an boiling
3- Fat (5.8% - 6%)
4- SNF (Solid non fat) (8.5-8.9)
5- PH test (6.8 – 6.9)
6- Adulteration test (only on doubt)
Up to reception temp of milk is about 8-10 oC, there is no rejection on
temperature basis.
Trollers are not preferred to stay more than 1.75 Hrs. in factory so that they can
in time collect milk for next day.
STORING OF MILK
Milk is stored in storage tanks called Silos. The capacity to store milk is 596 tons.
There are 5 Silos of100 tons each,
2 Silos of 10 tons each,
1 Silo of 70 tons.
Milk can be stored for 36 Hours in Silos.
STANDARDIZATION
All the animals have different composition of fats in their milk in different
seasons. Standardize milk according to the recipe milk is given temperature of 72
o
C for 15 seconds to reduce bacterias in milk, this process in called thermization
life of milk is increased by this process and in standardization composition of fats
and SNF are standardized.
DECREAMING
In this process dirt particles, SNF and cream is separated, milk is given temp of 60
o
C and 60,000 rpm in de-creamer. So that dirt particles cream can be separated.
Cream is send to butter section. Dirt is drained after 30 seconds milk is send for
further processes.
PASTEURIZATION
19
In This Process milk is heated at 92 oC for 5 seconds to remove remaining
bacterias.
Milk powder process activities
After pasterization milk to treated for canveersion into powder, following
activities are performed to milk:
Evaporation
(a) Low heat treatment
Milk is heated at high pressure of 889 milli bar so that it start boiling at about 70
oC .
(b) 4-effect falling film
Milk is evaporated in 4 effect system. Milk is evaporated about 56%, 62%, 67%
and 75% after 1st 2nd 3rd and 4th effect respectively. After 3rd effect
Homogenansization is done which uneven composition of fats and SNF is
homogenized
Spray drying
In this process there are 5 lateral high pressure nozels which exert high pressure
on milk after that there which exert high pressure on milk after that there are
about 50% water and 50% solids are remained in milk. After this step about 320
o
C hot air is thrown on milk, it is very quick process in which powder settle in base
and moisture evaporate in forms of vapors.
Central lecithination:
Lecithinate is sprayed on powder so that it is converted into highly dissolvable
powder. That way Nestle Milk Pak say “ Nido is instant Milk” (easily dissolvable in
hot ad cold water).
Drying
After all these procuress still powder has 5.5 % moisture in it, Powder is dried
through x- Egran System to reduce moisture level up to 3.1%
Cooling
20
After drying there is a cooling process, in which powder is cooled before storing.
Storing of powder
Powder is stored in bins there are 40 bins , with capacity of --------each.
Packing
Milk is packed in different packing according to the weight required, form tote
tilting station from bins.
Capacity
Capacity is the maximum rate of out put for a facility. The operations manager
must provide the capacity to meet current and future demands; otherwise the
organization will miss the opportunities for growth & profits.
Nestle Milk Pak, Kabir Wala has installed new evaporate, doubling the Sout put of
spray dryer in 1999. Along said the were house capacity at Kabir Wala to handle
increased volumes of finished products was proportionately increased. They also
installed pouch filling machine, making Kabir Wala factory independent from
Sheikhu Pura for filling of full cream Milk powder.
Capacity for receiving milk is 60,000 Liter/Hours.
Milk is stored in storage tanks called Silos. The capacity to store milk is 596 tons.
There are 5 Silos of100 tons each,
2 Silos of 10 tons each,
1 Silo of 70 tons.
Milk can be stored maximum for 36 Hours in Silos.
Capacity planning is duty of top management and it is long term. In flush season
when milk is abundantly available they utilize capacity 100% as cleaning time is
just 4 hours daily and 20 hours of working. Installed capacity is NIDO plant is 560
tons, it produces 4 tons / Hours & in 20 working hrs it can produce 80 tons per
day. In summer when availability of milk is lower they have their annual shut
down (June). They have training session for employees and vacations in that
time. There are certain standards for labor utilization. Efficiency of employees is
calculated daily.
21
LOCATION
Facility location is the process of determining a geographic site for a firm’s
operations.
Nestle Pack has located one of its factories at Kabirwala.
REASONS FOR SELECTING THIS LOCATION
PROXIMITY TO SUPPLIERS AND RESOURCES
This factory has been located in this area because here the supply of milk is more
than the requirement of the local area. This factory location is immensely
surrounded by Argicultrual farms, villages and small towns. The people o f thess
areas have their own
Animals and the feudals of the region have their own live stock farms. So there
is abundant milk available.
Furthermore, by locating one factor y at Sheikhupura and the other at Kabirwala
the Nestl MilkPak can cover the geographic area of milk collection very well,
especially the area of whole Punjab.
REPUTATION OF THE LOCATION
Placing of the factory at Kabirwala is also advantageous in this way that at the
current place there was actually the factory in the name of Kabirwala Dairies Ltd.
(KDL). So the place has the reputation of having a milk factory. The suppliers of
milk are already oriented with this location.
PROXIMITY TO NATIONAL HIGHWAY
Kabirwala factory is quite closer to National Highways so the transportation of
Raw Material and Finished Goods is also easier.
In the end we can say that the most important and critical factor for locating the
facility at this place is the availability of the milk in this area.
SUPPLY CHAIN MANAGEMENT
22
Supply Chain |Management seeks to synchronize a firms fun ctions and those of
its suppliers to match the flow of materials , services and information with
customer demand. A basic purpose of supply Chain management is to control
inventory by managing the flows of materials.
TYPES OF INVENTORIES
Following types of inventories are kept by Nestle Milkpak Kabirwala:
RAW MATERIALS
Raw Material inventory of Nestle MilkPak consists of milk. Their Raw Material is
kept in Silos. Silos are the big tanks, which are used to store the milk. Inventories
of their raw materials cannot be maintained in bulk quality and for a longer
period of time.
The factory can store the milk up to 596000 liters. They have five silos for storing
the milk all have different capacities. The milk can remain there for the period of
36 hours without loosing quality.
WORK IN PROCESS INVENTORIES
Work in process inventories are not to huge. Whatever they put into production
they stop production after its completion if there is no unusual break down.
The unpacked goods inventory can be considered as the WIP inventory. The
condensed milk is stored in Bins. Bins are the big boxes in which the milk powder
is stored before packing it.
Then through an automatic plant the milk is packed. The butter is stored in huge
tubs. From where that is packed through the automatic.
FINISHED GOODS INVENTORY
Inventories of packaging material can also be included in WIP inventories. The
packing material is purchase externally. The supplier of packing material is
packages private limited Pakistan.
Nestle Milk Pak maintains huge amounts of F.G. inventories. There is a huge
warehouse within the factory. In the warehouse they store the finished goods.
23
Especially when the availability of milk is high then the L.M. is produced and stock
in this warehouse and the same is released when the Milk availability is lesser
and the production is also low.
Normally it’s the FG inventory the NM has RM & WIP inventories not that huge.
MATERIALS MANAGEMENT
There is a separate department in the factory which is responsible for purchasing
the materials and managers its supply.
There is a centralized system of material management. The whole operations of
which are looked after by the operations managers. There is also a stores officer
which also looks after the materials management.
SUPPLIER RELATIONS
The nature of relations maintained with suppliers can affect the quality,
timeliness and price of a firm’s products and senior. There are two types of
supplier relation competitive orientation.
COOPERATIVE ORIENTATION.
Nm’S SUPPLIERS RELATIONS
NM follows the cooperative orientation. They have very friendly and cooperative
relations with their supplier’s one hand and there are the suppliers of Milk and
on the other hand the suppliers of packing NM have cooperative relations with
both of its suppliers.
RELATION WITH MILK SUPPLIERS
NM has very cooperative relations with its milk suppliers. NM’s people
themselves look after the animals of the former who provide them milk and give
them useful tips.
NM provides various facilities to its milk suppliers. NM also provides or facility to
its suppliers. It also provides them consultancy facilities consultations s provided
for improving the milk quality looking after the health of the animals.
PROGRESSIVE FARMERS
NM use continuous review system. They have the whole computerized system. 24
How much stock is in the stone room how much stock has been further put into
warehouse and how much stock has been drawn from the stores? In this way
the k animals tinu supply trol to
The progressive farmers are the farmers having lotsyofeep a conand ous conmilk o
NM. These are farmers which wish to further grow. NM provides them loans for
improving their farms and for the purchase of animals. NM provides medical
facilities to the animals. The NM provides loans to these farmers for expanding
their farms. So that the milk requirements of NM can be filled. In turn the
supplier of milk also cooperate with NM
PACKAGING MATERIAL SUPPLIERS
The packaging material is supplied to NM by the packages (Pvt) Ltd. Pak NM have
very cooperative orientation with packages and they cooperate a lot with NM for
maintaining high quality of final product.
Sole sourcing P is the only supplier who provides are the packing material. So NM
use sole sourcing.
So NM has very cooperative orientation with its suppliers.
INVENTORY CONTROL SYSTEMS
For controlling inventory the NM use Continuous Review
Continuous Review
NM use continuous review system. They have the whole computerized system.
How much stock is in the stone room how much stock has been further put into
warehouse and how much stock has been drawn from the stores? In this way
they keep a continuous control over their inventory. The stores officer not only
maintains records but also makes visits at the warehouses to see the actual
situation of materials. The officer can review the inventory at any time.
Operations manager and the auditing people also check the inventory and its
records so that the risks of loss or manipulation may be minimized.
DISTRIBUTION
Distribution is the management of the flow of materials from manufacturer to
customer and from ware house to retailers. Involving the storage and
transportation of goods.
PLACEMENT OF FINISHED GOODS INVENTORY
DISTRIBUTION STRATEGIES OF NESTLE MILK PAK LTD. 25
The fundamentals decision is where to stock an inventory of finished goods there
can be two alternates.
i. Forward Placement
ii. Backward placement.
FORWARD PLACEMENT
In forward placement finished goods are stored closer to customer .NM use
forward placement as they use to keep the stock of finished goods in their
regional offices and distribution centers. From the distribution centers the goods
are further sent to the retailers.
BACKWARD PLACEMENT
In backward placement finished goods are stored at the manufacturing plant
where they keep goods stocked. So in this way they use backward placement
also. So for inventory placement NM uses a mix of forward placement and
backward placement in order to provide goods to the market on time.
DISTRIBUTION STRATEGIES OF NESTLE MILK PAK LTD.
Distribution plays important role in success and failure of any organization. The
organization may fail, if its distribution networks are not efficient and unable to
provide the necessary items at required place and at reasonable time.
Distribution system of Nestle is one of major source of competitive edge over its
existing rivals. Nestle has its own distribution networks equipped with all
necessary transportation facilities. They transport their products at major ten
regional sales offices, which are situated at different cities of Pakistan. These
sales office (distribution centers) have their own vans with sales people who sell
and transport goods to the small retailers. In general Nestle followed following
sequence for distribution of its products.
Company Distribution Center Retailer Customers
s
DISTRIBUTION STRATEGIES OF NESTLE MILK PAK LTD. 26
This figure indicates Nestle never sell directly is ultimate customers but follow
above sequence.
In general, Nestle has following two distribution strategies:
Selective distribution strategy
Extensive distribution strategy
For some products, Nestle adopt “selective strategy” in which firm distribute its
products on few selective retail outlets while for some products, Nestle people
go for “extensive strategy” in which they distribute their goods on all possible
retail outlets.
SELECTION OF TRANSPORTATION MODE
For transportation of goods to the regional offices NM has it own vans and other
vehicles. For further distribution to retailer the distributor of each area uses its
own vehicles.
For the milk collection the NM has their own tankers, which are made of special
material to maintain the quality of milk.
FORE CASTING
Fore cast is a prediction of future events used for planning purposes.
Forecasts are needed to aid in determining what presences are needed,
scheduling existing resources and acquiring additional resources. Accurate for
casts allow schedules to use machine capacity efficiently, reduce productions
times and cut inventories. Forecasts are needed to anticipate changes in prices or
costs or prepare for new laws or regulations, competitors, resource shortage or
technologies.
Forecasting methods may be based on mathematical models using historical data
available, qualitative methods drawing on managerial experience or a
combination of both.
Nestle Milk Pak forecast the demand of products on annually basis with mutual
understanding between planning and selling departments on the basis of
historical data and sales forecast estimates. They conduct monthly meetings and
fine tune the forecast on monthly basis. As in summer when availability of milk is
scarce and demand is high, they have stock in winter to meet this demand. They
A G G R EG A TI O N 27
produce more in peak season (Jan, Feb, and March) to meet the demand of lean
seasons (June, July, August).
AGGREGATE PLANNING
Aggregate plan is a statement of production rates, work force levels, and
inventory holdings based on customer requirements and capacity limitations.
PRODUCTION PLAN
A manufacturing firm aggregate plan is called as the production plan which
generally focuses on inventory holdings and production rates.
NM has its production plan which is generally developed by the planning
department.
AGGREGATION
NM aggregate their plan on the basis of total milk collection, total milk
requirements, total production etc.
TIME
The planning horizons of NM are of two types one is the long term planning
horizon which covers the period of ten years. The other is the shorter planning
horizon normally or one year.
LONG TERM PLANNING HORIZON
In long term planning horizon NM plans for about ten years. They plan how much
production capacity to be achieved. How much production rates will be required
what will be the customer demand how will they collect the milk. From where
they will collect the milk. How many number of animals would be there is a
particular area and from there how much milk we will be collecting. They got all
the information and plan for a longer period of time.
SHORTER PLANNING HORIZON
In shorter planning horizon they plan usually for one year and then further
decompose that in seasonal plan. How much to produce in a year. How much
milk to be collected in one year what is the deficiency or surplus. How much
A G G R EG A TI O N 28
inventories we will be holding. This yearly plan is further divided into four
quarters. Targets are set for each quarter and the efforts are made to achieve the
targets.
QUALITY
Quality has no proper definition its vary from person to person. In general sense
quality may be defined as meeting or exceeding the expectations of customers.
In general business’s success depends on the accuracy of its perception of
customer’s expectations and its ability to bridge the gaps between those
expectations and operating abilities. Good quality can also pay off in high profits.
High quality products and services can be priced higher then comparable low
quality once. And yields a greater return for the same sales dollars. Poor quality
erodes firm’s ability to compete in market place and increase the costs of
producing the product or service.
Nestle Milk Pak has quality as its top competitive priorities along with availability
of its products all over.
In quality they want to achieve consistent quality and even to improve it
continuously. In this regard the stress on customer satisfaction, continuous
improvement and employee involvement.
There is strict quality control by computerized system in control room, quality of
product are assured at each stage.
Customer satisfaction
Nestle take their customer on top of its hierarchical chart. Its top priority is to
satisfy the customer. They design the product in such a way that they confirm
their speciation, fit for use and give support to the company image.
Employee involvement
Nestle milk pak involves their employees in making decisions and changing in
organization. They have idea boxes in factories and offices, employees are
encourages to give ideas about improvement.
They conduct weekly meetings and discuss the ideas; good ideas are rewarded to
motivate employee’s involvement. There are formal training sessions for
A G G R EG A TI O N 29
employees to train them and enhance their capabilities. Employees are given
rewards and incentives to involve them more in organization.
Continuous improvement
Nestle Milk Pak try to improve the quality of products continuously they conduct
continuous improvement meetings to improvement the quality. They train the
employees for improving quality tools, build team work, employee involvement
and develop sense of operator ownership.
Improving quality through TQM
Programs for employee involvement and continuous improvement are aimed at
improving quality in general sense. However, TQM often focuses on
benchmarking, product and process design.
BENCHMARKING
Benchmarking is a continuous systematic procedure that measures a firm’s
product and process against industry leaders. As NESTLE is industry leader in food
products, each factory has its benchmark to improve quality. Nestle Milk Pak
Kabirwala takes Nestle Tambula factory Australia as bench mark, which is the
best Nestle factory in all over the world. Nestle Milk Pak Kabirwala is at 2 nd
number.
PRODUCT & PROCESS DESIGN
Nestle Milk Pak design the produce according to the customer’s satisfaction and
process is designed in such a way to maintain purity and nutrition’s of the
products.
QUALITY CERTIFICATION
Nestle Milk Pak has its own quality standard certification which has much higher
standards as compared to ISO, called Nestle Quality Standards. Nestle Milk Pak
Kabirwala is approved by Nestle Quality Standards.
In which quality is maintained right from the purchase of raw material to the
distribution of the products to the ultimate consumers.
Quality of Materials
A G G R EG A TI O N 30
Quality of Process
Distribution
Continuous improvement
Customer satisfaction
Employee involvement
DETAILS OF PRODUCTION PROCESS 31
DETAILS OF PRODUCTION PROCESS
Milk Collection
Milk Collection system of Industry is excellent. According to this system the
companies’ trucks reach 140000 milkmen and collect milk daily. The milkmen
provide milk on contract basis. Prices of milk vary in case of self-collection and
contract basis. On milk center price of milks is paid at Rs. 5.80 per liter at 6%
Fats. If the quality of fat is less than required 6% then price will be paid less
proportionately.
Percentage of FAT in Various Kinds of Milk.
Buffalo 6% Fat
Cow 3.5%
Goat 3%
Sheep 6%
Human 3.5%
At milk collection centers, Gerber Test in done for the determination of Fat.
Companies are bounded to maintain 3.5% Fats under pure Food Laws. It is legal
requirement throughout the world.